tag:blogger.com,1999:blog-816559531110064247.post2084792325853253507..comments2018-01-23T02:12:52.834-08:00Comments on Humble Student of the Markets: Why this is not the start of a bear marketCam Huihttps://plus.google.com/109088337527104426210noreply@blogger.comBlogger17125tag:blogger.com,1999:blog-816559531110064247.post-45841411916040191282015-12-09T06:36:21.837-08:002015-12-09T06:36:21.837-08:00Great blog There are two scenarios to consider. Th...Great blog There are two scenarios to consider. The more optimistic one involves the market finds support somewhere and start to base through a period of sideways consolidation.Thanks for sharing......<br /><br /><a href="http://shazaniq.co.uk/fast-growth-businesses/" rel="nofollow">Get Fast Growth Business Consultancy</a> | <a href="http://shazaniq.co.uk/fast-growth-businesses/" rel="nofollow">Fast Growth Business and Problems Solution Provider</a>shazaniqhttps://www.blogger.com/profile/06651133193051264875noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-48870027543697878342015-09-27T17:05:42.186-07:002015-09-27T17:05:42.186-07:00Sentiment may be bearish but it is now in sync wit...Sentiment may be bearish but it is now in sync with the primary trend and must be judged accordingly.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-40214689036044833972015-09-27T08:34:58.169-07:002015-09-27T08:34:58.169-07:00http://humblestudentofthemarkets.blogspot.com/2008...http://humblestudentofthemarkets.blogspot.com/2008/01/sentiment-models-going-to-more-bearish.html<br /><br />Sentiment models are contrarian, until they aren&#39;t. Better for btfd buying, trouble is you don&#39;t know if it&#39;s a dip, correction, or something nastier. Pretty impossible to say right now. And while yes, A market crisis is a tail risk, butwe are also reaching the end of a natural cycle. National bureau of economic says since 1854, cycles have been 38.7 months on average! Crazy short. Luckily since 1945 they have grown to 58.4, just under five years from trough to peak. We are at what, 72-74 months? 4 of 11 cycles since 1945 were longer. (Also interesting, none before 1945 were longer than 50 months.) We have time, question is how much will going to cash today give up over the next 2-3 years if this isn&#39;t the big one, and how big will the next correction be. All impossible to answer, more important answering your own risk tolerance and liquidity profile for the next two to three years....and how much leverage people have (which is at or near all time highs, added risk I would certainly be removing, and people will, which will be a head wind).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-11365131973409474552015-09-27T07:25:38.652-07:002015-09-27T07:25:38.652-07:00I don&#39;t know enough about the nuances of a bea...I don&#39;t know enough about the nuances of a bear market definition to make a case.<br />So all&#39;s I will say is that this market has a bearish bias.<br />Meaning that rallies should be shorted.<br />And buying the dips should be avoided.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-58180382644406142822015-09-26T20:54:44.976-07:002015-09-26T20:54:44.976-07:00&gt;&gt; 1998 and 2011
The 1998 episode ended wit...&gt;&gt; 1998 and 2011<br /><br />The 1998 episode ended with a surprise rate cut which Greenspan timed to fall on opt. exp.<br />The similarities of the S&amp;P chart with 2011 are actually quite interesting, however it ended with &quot;operation twist&quot; and more QE later on.<br /><br />I assume the Fed will not help this October, so only a good earnings season could provide for enough enthusiasm to get this market out of its confusion, or a rebound in commodities.wolfhttp://wolfhonest.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-22402014808000459232015-09-26T09:29:42.995-07:002015-09-26T09:29:42.995-07:00Randy is right, we&#39;ve had 2 low probability ev...Randy is right, we&#39;ve had 2 low probability events in the past 15 years. Bubbles are bursting everywhere. Once one of the EM countries run into an even bigger crisis (Turkey, Malaysia, Brazil, Petrobras, Venezuela, Argentina,etc), it will have a knock-on effect on all the others. The dollar rises which further kills the EMs. It&#39;s a recipe for a very big decline. China is a house of cards. Europe is a house of cards. Deutsche Bank is a house of cards. Debt is higher than ever compared to 2007. Greenspan is pilloried for having rates too low for just 2 years but it set in motion the housing bubble that burst in 2007. We&#39;ve had zero Fed Funds rates for nearly 7 years now. None of us even know how much hidden leverage is lurking due to zero rates. Cam, you may very well be right with regard to your targets. I actually think your reasoning is excellent. But no, I don&#39;t think it&#39;s a stretch to expect financial crises as a &quot;base case&quot;. It&#39;s my base case, but we&#39;ll see how it plays out. It&#39;s unknowable as you rightly point out. Obviously I&#39;m not &quot;betting the farm&quot; on such an unknowable scenario, but I&#39;ve hedged my small portion of dividend paying stocks (utilities, telecom, tobacco, reits). As an early-retiree, I live on dividends, so with some preferred shares and muni bond funds, my 14% dividend-paying equity allocation is fully hedged at this time.Doughttps://www.blogger.com/profile/15390195359820943177noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-61781607211351843552015-09-26T03:19:48.574-07:002015-09-26T03:19:48.574-07:00Forward earnings still rising? Where is &#39;facts...Forward earnings still rising? Where is &#39;factset&#39; getting this data? When I see what is going on in the economy and I see this continual chart you post with never ending rising earnings expectations, I really start wondering if the whole world is going bonkers and not just the looney global warming crowd. <br /><br />Here&#39;s what the reuters had to say this morning:<br /><br />&quot; Wall Street Braces For Grim Third Quarter Earnings Season (Reuters) <br /><br />Wall Street is bracing for a grim earnings season, with little improvement expected anytime soon. Analysts have been cutting projections for the third quarter, which ends on Wednesday, and beyond. If the declining projections are realized, already costly stocks could become pricier and equity investors could become even more skittish. Forecasts for third-quarter S&amp;P 500 earnings now call for a 3.9% decline from a year ago, based on Thomson Reuters data, with half of the S&amp;P sectors estimated to post lower profits thanks to falling oil prices, a strong U.S. dollar and weak global demand. Expectations for future quarters are falling as well. A rolling 12-month forward earnings per share forecast now stands near negative 2%, the lowest since late 2009, when it was down 10.1%, according to Thomson Reuters I/B/E/S data.&quot;<br /><br />Ah, yes, something a little bit more to the liking of my &#39;reality based&#39; mind. <br /><br />It is apparent that &#39;factset&#39; is just some kind of purveyor of &#39;adjusted&#39; facts. <br /><br />And another reason why I tend to only use tech analysis, because it seems to me it is harder to make up stuff out of whole clothe and represent it as fact. (set)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-25296339733773912162015-09-25T11:43:19.479-07:002015-09-25T11:43:19.479-07:00But we have had 2 such &#39;low probability events...But we have had 2 such &#39;low probability events&#39; within the last 15 years! Don&#39;t you think that makes these tail-risk market crashes fairly common? The fact is that a lot of people have 401K&#39;s that are invested. The market has gone down about 10 percent from a peak that lasted several months. Some people will notice that. They will then go into cash. The market will go down some more. That will cause more people to go into cash. Yadda yadda.<br /><br />Do people spend more, less or the same when their life savings have taken a 10 percent hit? <br />How will that spending cutback affect profits?<br /><br />Randyhttps://www.blogger.com/profile/00032093796955347846noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-72392059110562040092015-09-25T11:00:13.522-07:002015-09-25T11:00:13.522-07:00I think the big piece that is missing is the consu...I think the big piece that is missing is the consumer. Namely, the debt consumers carry and even the smallest rise in interest cost is going to have a detrimental effect on spending. I would not be surprised if that fear has disproportionally skewed market behavior as of late more so than is being talked about.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-35484173373478887852015-09-25T10:41:50.246-07:002015-09-25T10:41:50.246-07:00Cam. Many irresponsible things have happened, debt...Cam. Many irresponsible things have happened, debt-wise, in the global economy thanks to central banks&#39; continued munificence since 2008/2009. Expecting this fragile world to break in the near to intermediate term would not qualify as some random event like a California earthquake. It is as inevitable as the destruction of an antique vase in the middle of a room full of five year olds. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-3360310576525602022015-09-25T10:08:28.424-07:002015-09-25T10:08:28.424-07:00Brief yet thorough analysis which I appreciate gre...Brief yet thorough analysis which I appreciate greatly. I see it similarly at present. The next few weeks will be telling and likely will hold that US economy continues to expand nicely, though not robustly. <br /><br />Adding to this analysis, experience and history indicate that most market tops happen after significant EPS growth driven by capital shifting from interest bearing instruments into the equity markets which typically occurs at the initial start of rising rates. This final phase of the market reaches a zenith when those same rising rates become a perceived threat to continued economic expansion. This perception is based on real economic data indicating such.<br /><br />WIth that said, we are at the initial stage of rising rates in the US, while much of the rest of the world is still focused on monetary stimulus. Are we 6 months, 12 months, 2 years from the point where rising US rates result in real economic slowdown. Hard to say, but it seems clear we are at the beginning of the final bull phase in this particular business cycle, not the end. <br /><br />The only argument against this is to think China has no ammunition to stimulate it&#39;s economy and thus sees continued erosion leading to global deflation. This may be the long term scenario of our Supply Side Global Economic environment, but not quite there yet.Independence01776https://www.blogger.com/profile/06521494073184086238noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-50715735317592531512015-09-25T08:34:02.937-07:002015-09-25T08:34:02.937-07:00If the thesis is that the S&amp;P goes weak after ...If the thesis is that the S&amp;P goes weak after rates begin rising, you have to explain where the money will go. S&amp;P still provides the best return.<br /><br />Also note that from 1998-2000 unemployment was well below 5%. *THAT* is the standard for the US economy. And it was a great time to be in the market!<br /><br />I&#39;m also skeptical about the crazy bear cases being spread all over right now. If people really were scared about a China crash or currency liquidity crisis or a global recession or blah blah, they&#39;d be buying gold hand over fist to protect against tail risk. The recent market crash was just VaR models acting screwy, and it&#39;ll take a while to develop and program new models.I Will Never Accept The Terms of Servicehttps://www.blogger.com/profile/09422355923256894207noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-42809156021079757932015-09-25T06:44:25.057-07:002015-09-25T06:44:25.057-07:00Cam,
Forward EPS is very lagging indicator. It wa...Cam,<br /><br />Forward EPS is very lagging indicator. It was still rising in late 2007 as the economy was entering a recession. I don&#39;t think we can take it to the bank. Actual earnings have rolled over and earnings lead the business cycle, very reliably. Of course, earnings can turn back up again but the probabilities are more evenly placed here that &quot;recession is remote&quot; would suggest.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-27704983860344218052015-09-24T20:43:35.005-07:002015-09-24T20:43:35.005-07:00Anon - FYxx EPS almost always fall. You have to no...Anon - FYxx EPS almost always fall. You have to normalize with forward 12m EPS. See my previous post: http://humblestudentofthemarkets.blogspot.com/2015/09/why-you-shouldnt-freak-out-about.html<br /><br />Doug - You are correct that most forecasters are not good at turning points. You are postulating a financial crisis, which is a tail-risk event and really a guess on your part. If I knew the future about a tail-risk event, e.g. California getting hit with THE BIG ONE and sliding into the Pacific, I would be able to make money too. I prefer not to bet on unknowable tail-risk, which, by definition, is a low probability event.<br /><br />Cam Huihttps://www.blogger.com/profile/09672203690656029787noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-48704393507372547012015-09-24T20:09:38.769-07:002015-09-24T20:09:38.769-07:00Hi Cam,
I would suggest the forward EPS outlook ...Hi Cam, <br /><br />I would suggest the forward EPS outlook is weakening, not strengthening. <br /><br />See http://us.spindices.com/indices/equity/sp-500 , go to Additional Info, Index Earnings, then lines 84-92 of the spreadsheet. <br /><br />To summarize: 2015EST EPS has fallen from $137.19 in Mar 2014 to $111.26 currently and 2016EST EPS has fallen from $134.75 in Mar 2015 to $129.73 currently. <br /><br />all the bestAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-5312798791122452482015-09-24T18:28:35.318-07:002015-09-24T18:28:35.318-07:00There&#39;s good reason to think that most people ...There&#39;s good reason to think that most people won&#39;t predict the next recession.<br /><br />I just checked and the LEIs did not successfully predict the 2001 and 2007 recessions. They predicted slowdown but not recession. Both recessions were caused by burst financial bubbles -- the stock market plunge in 2001 and the ongoing financial crisis in 2007. So far, there&#39;s no financial &quot;event&quot; yet, but I&#39;m confident one is coming that will confound most prognosticators. Doughttps://www.blogger.com/profile/15390195359820943177noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-26995112749312746532015-09-24T17:45:58.206-07:002015-09-24T17:45:58.206-07:00Well reasoned post. But the last two recessions w...Well reasoned post. But the last two recessions were triggered (or curiously coincident with) bursting financial bubbles. I happen to think there is that risk now (Glencore or Petrobras or some country or institution default for instance). These effects are not captured by LEIs. But you may still be right and these events may just knock down the averages as you suggest. LEIs aren&#39;t looking too good by the way but aren&#39;t recessionary (absent a shock, financial or otherwise). Doughttps://www.blogger.com/profile/15390195359820943177noreply@blogger.com